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Fitness is in this earnings season


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This retail earnings season had some major winners and losers. Consumers weren’t exactly racing to restaurants overall. Domino’s was one of the few standouts with a 6.8 percent same-store sales growth. But the average same-store sales growth across the franchised burger segment was 1.4 percent. It’s better than nothing, but not by much and includes some significant price increases to keep comps growing.

Planet Fitness, on the other hand, had an incredible quarter. Same-store sales were up 10 percent, lapping 9 percent same-store sales growth in the same quarter last year. That’s some impressive growth, well beyond the 44 locations that put the company beyond the 1,600 mark. And just about every financial metric grew beyond 20 percent. Revenue was up 31 percent to $140.6 million, net income was up 53.3 percent and earnings before interest, taxes depreciation and amortization (EBITDA) was up 21.8 percent. Planet Fitness expects revenue to be up 26 percent for 2018 overall.

The management team credited tax reform for a more than 13 percent reduction in tax rates, but there was a lot going on in those results. Membership fees ticked up some, accounting for 25 percent of the same-store sales bump and the royalty rate rose from 3.9 percent to 5.5 percent on average. CEO Christopher Rondeau credits the latter with the same-store sales performance.

“I think because we continue to comp as we are, and you see momentum here in our comps over the last 10 years now, I think it's really a factor of the ever-expanding marketing budget,” said Rondeau.

On the finance side, the company completed a securitization process, which leads to a lower cost of capital as the company grows to its goal of 4,000 locations.

Domino’s shows that you can’t bet against delicious carbs, but performance like this at Planet Fitness might get some large operators looking beyond budget burgers and seriously considering budget fitness for their next diversification.

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